July 1, 2022 | Breanna Hardy – Staff Writer
As is apparent from this week’s list of SBA Lenders (see page 10), small businesses demand small balance loans, but there remains room for improvement to reach underserved owners.
David Cody, co-founder and co-CEO of Chicago based Newity, a virtual financial servicer, said his company is looking to meet the needs of small businesses still searching for loans after the Paycheck Protection Program ended.
Newity was created during the pandemic when the PPP needed help getting off the ground. Though not a lender, it serviced more than $11.3 billion in loans.
“We saw an opportunity to create a company that could help facilitate the flow of money from the government, the SBA specifically, into the hands of small businesses and to play the role of servicer,” Cody said.
Now that PPP has fully run its course and most businesses have received loan forgiveness, Newity is looking to benefit businesses in other ways, like assisting with 7(a) loan applications — the most popular SBA loan.
“Our primary mission right out of the gates is to help the smallest, most underserved,” Cody said. “Those borrowers are not accessing 7(a) at the same volume as they access PPP. That begs the question, ‘Why?’”
He says it’s because of the lack of incentive for financial institutions to facilitate the flow of that credit in such small sizes to businesses. The SBA 7(a) loan product is falling way short of providing access to capital for the very young businesses that it is designed to help fund in the first place, he said.
People started to realize how many small businesses were out in their communities, and those statistics were never really available before the pandemic, he said. Using this data to help the smallest of businesses,
especially in underserved communities, is paramount to making 7(a) loan distribution more effective, he said.
Inflation and rising interest rates have created general market uncertainty for many people in business.
“I think what’s very difficult for small businesses is that this is all coming on the back of a pretty traumatic couple of years,” Cody said.
But he says there’s opportunity on the horizon for small businesses. The rollout of PPP gave the public a gauge of how many small businesses are out there and what they need by way of capital.
“I do believe that PPP created the opportunity for the renaissance of the SBA,” Cody said.